Low Inventory, Sluggish Building Defined Housing in 2017; Expect 2018 to Look Similar
Persistently low inventory of homes for sale, and low levels of single-family home building activity in particular, proved the most surprising housing trends to a majority of experts in 2017 – and they say neither is particularly likely to reverse course in 2018, nor is homeownership expected to rise much.
Low single-family home building activity and low inventory levels were cited as the most surprising 2017 housing trends by 34 percent and 18.6 percent of experts, respectively, surveyed in the Q4 2017 Zillow Home Price Expectations Survey.[1] Continued low mortgage interest rates were the third-biggest surprise, cited by 15.5 percent of respondents. None of the other choices – including no progress on GSE reform, little growth in the U.S. homeownership rate, consistently high renter household formation and solid home price growth – was cited as most surprising by more than 10 percent of respondents.
Looking ahead into 2018, the largest group of panelists indicated the era of persistently very low mortgage interest rates the market has enjoyed over the past few years may be coming to a close – 36.5 percent of those with an opinion said low mortgage rates were the major trend most likely to change next year. Just 16.7 percent said the low level of building activity was the trend most likely to change in 2018, with only 6.3 percent saying low inventory levels were most likely to significantly change.
Panelists were also asked to predict where a basket of key economic indicators would stand at the end of 2018:
Panelists views on the pace of home value growth have consistently grown over the past several quarters, likely because of low mortgage rates spurring demand and low inventory constricting supply – a recipe for rapid home value growth that has been in place for the past several years. On average, panelists said they expect home values to end this year up 5.6 percent from the end of 2016 (as of October 2017, median U.S. home values were up 6.5 percent year-over-year. Panelists said they expected home values to end 2018 up 4.13 percent from the end of this year, on average. At the end of 2016, the same panelists said they expected home values to end 2017 up 3.61 percent and 2018 up just 2.97 percent year-over-year, on average.
[1] The Zillow Home Price Expectations Survey is a quarterly survey of more than 100 economists, academics and housing market experts, sponsored by Zillow and administered by Pulsenomics. This edition of the Zillow Home Price Expectations Survey surveyed 108 experts between October 24 and November 6, 2017.